Companies set to win lease accounting concessions

LONDON Jan 27 (Reuters) - A draft rule forcing companies to
put leases on their balance sheets is set to be eased after
fierce opposition from companies worried that investors would
take fright and that loans linked to leverage would be put at
risk.

The International Accounting Standards Board (IASB) and the
U.S. Financial Accounting Standards Board (FASB) have proposed a
single global book-keeping rule to increase transparency for
markets and make it easier to compare firms.

But companies, who often have thousands of leases, say the
reform could swell balance sheets by trillions of dollars.

"We have started a re-deliberation and we expect to take the
most important decision in March," IASB Chairman Hans
Hoogervorst told a meeting of the board's trustees and
monitoring group of regulators, shown by webstream from Milan.

Leases for items ranging from photocopiers to property are
kept off balance sheets and mentioned in footnotes, leaving
investors estimating what Hoogervorst calls hidden leverage.

Chief executives are also telling their chief financial
officers to keep balance sheets lean by using leases, he said.

"This is going to be very sensitive and very difficult
decision-making," Hoogervorst said.

The IASB will consider how to cut the cost of applying the
new rule, such as by limiting "small ticket items".

"We don't necessarily want to see every coffee machine and
photocopier on the balance sheet," he said.

A two-model approach has been proposed for leases longer
than a year, one for property and the other for equipment which
incurs higher costs upfront.

The IASB could opt for one model, ditch plans to reform
lessor accounting, and push back the start date for the lessee
accounting change, Hoogervorst said.

Many investors make "virtual" balance sheet adjustments to
take leases into account, but often exaggerate their impact and
therefore some companies will look less leveraged once the
reform is in place, he said.
(Editing by Louise Ireland)